investor presentation...reconciliations of those historical non-gaap financial measures and for...
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Investor PresentationF I R S T Q U A R T E R 2 0 2 0
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Agenda
Business Overview
Forward-Looking Statements and Non-GAAP Financial Information:
Our discussions during this conference call and in this presentation will include forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. Some of the factors that could cause actual
results to differ are discussed in the Company’s SEC filings. Our filings are available on our website at http://investor.abm.com under “Company Information”. A description of other factors that could cause actual results to differ is also set forth at the
end of this presentation.
Also, the discussion during this conference call and in this presentation will include certain financial measures that were not prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Please see the Appendix for
reconciliations of those historical non-GAAP financial measures and for information relating to the use of certain other non-GAAP financial measures. Reconciliations of certain non-GAAP financial measures can also be found on the Investor
Relations portion of our website at http://investor.abm.com.
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2 First Quarter 2020 Review
3 Capital Structure
4 Fiscal 2020 Outlook
5 Appendix
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Business Overview
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$1.62
$2.05
Adjusted EPS
$0.94
$1.91
Continuing EPS
SIGNIFICANT GROWTH AND CONTINUED OPPORTUNITY AHEAD
2020 Vision Achievements
$4.9
$1.6
$6.5
$2.4
Revenue (Billions) Market Cap(Billions)
FY 2015 FY 2019
¹ Please refer to the appendix for a reconciliation of GAAP to non-GAAP measures.
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Revenue
(Billions)
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Founded in 1909 | $6.5 Billion in Revenue
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Aviation
Business & Industry
Education
Technology & Manufacturing
Building Value Through Industry ExpertiseKeeping your environment safe, clean, comfortable and energy efficient through individual or integrated solutions
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Business & Industry(50%)
Aviation (15%)
Technology & Manufacturing
(14%)
Education(13%)
Technical Solutions (8%)
Industries We Serve
As of Fiscal 2019
Results as of fiscal 2019.
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Services We Perform
As of Fiscal 2020
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Impact to operating costs through SOPs, labor
management, technology and purchasing
energy and asset
lifecycle management
Majority self-performed services maximizes
alignment with client workplace strategy,
increases quality, efficiency and control,
and reduces management costs
+ +
$ Value = direct operational cost savings + increased client portfolio asset value + enhanced client workforce productivity
Aligning workplace strategy with operational best practices for improved cost efficiencies, productivity, communication and scalability
Targeting the Outsourcing Continuum
SAVINGS
SERVICES
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UNPARALLELED C L I E N T E L E
AV
IAT
ION
BU
SIN
ES
S &
IN
DU
ST
RY
ED
UC
AT
ION
TE
CH
NO
LO
GY
& M
AN
UF
AC
TU
RIN
G
TE
CH
NIC
AL
SO
LU
TIO
NS
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History of M&A
Janitorial
2007
Aviation
Healthcare
2012
Lighting
Mechanical
Electrical
2010
Janitorial (UK)
2014
Sold Security
business
2015
Technical Solutions (UK)
Sold
Government
business
2017
Education and
Commercial
20172015
$3B $6.5B
*Dates based on calendar year
2019
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First Quarter 2020 Review
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$1,607.9 $1,612.9
2019 2020
Q1 FY20 Revenue
First Quarter 2020 Review
Revenue
Growth
0.3%
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Q1 FY20 Income from Continuing Operations
$20.8
$26.2
2019 2020
Q1 FY20 Adj. Income from Continuing Operations
$13.0
$27.9
2019 2020
¹ Please refer to the appendix for a reconciliation of GAAP to non-GAAP measures.
First Quarter 2020 Review
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$0.20
per share
$0.31
per share
$0.39
per share$0.41
per share
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Q1 FY20 Net Income
$68.8 $68.8
2019 2020
Q1 FY20 Adj. EBITDA
$13.0
$28.0
2019 2020
¹ Please refer to the appendix for a reconciliation of GAAP to non-GAAP measures.
First Quarter 2020 Review
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$0.19
per share
$0.42
per share4.3%
margin4.3%
margin
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First Quarter 2020 Segment Results
Business &
Industry• Revenues of $820.9m vs. $828.8m last year
• Operating profit of $38.2m, operating margin of 4.7%
Aviation• Revenues of $238.7m vs. $252.4m last year
• Operating profit of $5.6m, operating margin of 2.3%
Technology &
Manufacturing• Revenues of $233.9m vs. $236.1m last year
• Operating profit of $16.7m, operating margin of 7.1%
Education• Revenues of $208.0m vs. $208.9m last year
• Operating profit of $11.2m, operating margin of 5.4%
Technical Solutions• Revenues of $142.0m vs. $116.1m last year
• Operating profit of $8.3m, operating margin of 5.9%
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Capital Structure
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Select Cash Flow and Balance Sheet ItemsLeverage
*Acquired GCA Services Group for approximately $1.3b, largest acquisition in Company’s history
Other acquisitions shown represent purchase price above $15m
Leverage calculated as total indebtedness/pro-forma adjusted EBITDA
Future State
Target of 2.5x to 3.0x
(in
mill
ions)
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Select Cash Flow and Balance Sheet ItemsShareholder Return
AS OF JANUARY 31, 2020, THE COMPANY HAD $150.0 MILLION OF REMAINING
BUYBACK AVAILABILITY UNDER ITS $150.0 MILLION SHARE REPURCHASE PROGRAM
(in
mill
ions)
*Capital allocation focus on delevering to historical levels following the GCA acquisition.
*
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Select Cash Flow and Balance Sheet ItemsAnnual Dividend
LONG HISTORY OF CONSECUTIVE DIVIDEND GROWTH
1Q20 MARKS THE 215TH CONSECUTIVE QUARTERLY CASH DIVIDEND
(in
mill
ions)
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Fiscal 2020 Guidance Outlook
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Fiscal 2020 OutlookMetric Amount
Income from continuing operations per diluted share $1.65 - $1.85
Adjusted Income from continuing operations per diluted share $1.90 - $2.10
Depreciation $50m - $55m
Amortization $47m - $52m
Interest Expense $45m - $50m
Capital Expenditures $45m - $55m
Adjusted EBITDA Margin 5.0% to 5.2%
Tax Rate (excluding WOTC & other discrete tax items) ~30%
Free Cash Flow ~$175m
2020 Working Days
Quarter Q1 Q2 Q3 Q4
Days 66 64 66 65
Δ y-o-y 0 +1 0 -11 With the exception of the 2020 Work Opportunity Tax Credits and anticipated excess tax benefits on stock-based awards, this guidance does not include any potential effects associated
with certain other discrete tax items and other unrecognized tax benefits.
² Please refer to the appendix for a reconciliation of GAAP to non-GAAP measures.3 Adjusted EBITDA margin is defined as adjusted EBITDA divided by revenue; Free Cash Flow defined as net cash provided by operating activities less capital expenditures. We cannot
provide a reconciliation of such forward looking non-GAAP measures to GAAP without unreasonable effort due to the inherent difficulty in forecasting and quantifying certain amounts
that are necessary for such reconciliations.
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1 2
3
3
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Fiscal 2020 Outlook
Segment FY20 Operating Margin %
Business & Industry Mid-5%
Aviation Mid-3%
Education Mid-5%
Technology & Manufacturing Low-8%
Technical Solutions Mid-9%
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Appendix
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Forward Looking Statements
This presentation contains both historical and forward-looking statements about ABM Industries Incorporated (“ABM”) and its subsidiaries (collectively referred to as “ABM,” “we,”
“us,” “our,” or the “Company”). We make forward-looking statements related to future expectations, estimates and projections that are uncertain, and often contain words such as
“anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “likely,” “may,” “outlook,” “plan,” “predict,” “should,” “target,” or other similar words or phrases. These
statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and assumptions that are difficult to predict. For us, particular
uncertainties that could cause our actual results to be materially different from those expressed in our forward-looking statements include: our success depends on our ability to
gain profitable business despite competitive market pressures; our business success depends on our ability to attract and retain qualified personnel and senior management and
to manage labor costs; our ability to preserve long-term client relationships is essential to our continued success; changes to our businesses, operating structure, financial
reporting structure, or personnel relating to the implementation of strategic transformations, enhanced business processes, and technology initiatives may not have the desired
effects on our financial condition and results of operations; acquisitions, divestitures, and other strategic transactions could fail to achieve financial or strategic objectives, disrupt
our ongoing business, and adversely impact our results of operations; we manage our insurable risks through a combination of third-party purchased policies and self-insurance,
and we retain a substantial portion of the risk associated with expected losses under these programs, which exposes us to volatility associated with those risks, including the
possibility that adjustments to our ultimate insurance loss reserves could result in material charges against our earnings; our risk management and safety programs may not have
the intended effect of reducing our liability for personal injury or property loss; our international business involves risks different from those we face in the United States that could
have an effect on our results of operations and financial condition; our use of subcontractors or joint venture partners to perform work under customer contracts exposes us to
liability and financial risk; we may experience breaches of, or disruptions to, our information technology systems or those of our third-party providers or clients, or other
compromises of our data that could adversely affect our business; unfavorable developments in our class and representative actions and other lawsuits alleging various claims
could cause us to incur substantial liabilities; a significant number of our employees are covered by collective bargaining agreements that could expose us to potential liabilities in
relationship to our participation in multiemployer pension plans, requirements to make contributions to other benefit plans, and the potential for strikes, work slowdowns or similar
activities, and union organizing drives; our business may be materially affected by changes to fiscal and tax policies, and negative or unexpected tax consequences could
adversely affect our results of operations; changes in general economic conditions, such as changes in energy prices, government regulations, or consumer preferences, could
reduce the demand for facility services and, as a result, reduce our earnings and adversely affect our financial condition; future increases in the level of our borrowings or in
interest rates could affect our results of operations; impairment of goodwill and long-lived assets could have a material adverse effect on our financial condition and results of
operations; if we fail to maintain proper and effective internal control over financial reporting in the future, our ability to produce accurate and timely financial statements could be
negatively impacted, which could harm our operating results and investor perceptions of our Company and as a result may have a material adverse effect on the value of our
common stock; our business may be negatively impacted by adverse weather conditions; catastrophic events, disasters, and terrorist attacks could disrupt our services; and
actions of activist investors could disrupt our business. The list of factors above is illustrative and by no means exhaustive.
For additional information on these and other risks and uncertainties we face, see ABM’s risk factors, as they may be amended from time to time, set forth in our filings with the
Securities and Exchange Commission, including our most recent Annual Report on Form 10-K and subsequent filings. We urge readers to consider these risks and uncertainties
in evaluating our forward-looking statements. We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date made.
We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
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Use of Non-GAAP Financial Information
To supplement ABM’s consolidated financial information, the Company has presented income from continuing operations and income from continuing operations per diluted share
as adjusted for items impacting comparability, for the first quarter of fiscal years 2020 and 2019. These adjustments have been made with the intent of providing financial
measures that give management and investors a better understanding of the underlying operational results and trends as well as ABM’s operational performance. In addition, the
Company has presented earnings before income from discontinued operations, net of taxes, interest, taxes, depreciation and amortization and excluding items impacting
comparability (adjusted EBITDA) for the first quarter of fiscal years 2020 and 2019. Adjusted EBITDA is among the indicators management uses as a basis for planning and
forecasting future periods. The Company has also presented Free Cash Flow which is defined as net cash used in operating activities less additions to property, plant and
equipment. The presentation of these non-GAAP financial measures is not meant to be considered in isolation or as a substitute for financial statements prepared in accordance
with accounting principles generally accepted in the United States of America. (See accompanying financial tables for supplemental financial data and corresponding
reconciliations to certain GAAP financial measures.)
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Unaudited Reconciliation of Non-GAAP Financial Measures
(a) The Company adjusts income from continuing operations to exclude the impact of certain items that are unusual, non-recurring, or otherwise do not reflect management's views of the underlying operational results and trends
of the Company.
(b) Represents the net adjustments to our self-insurance reserve for general liability, workers’ compensation, automobile and medical and dental insurance claims related to prior period accident years. Management believes
these prior period reserve changes do not illustrate the performance of the Company’s normal ongoing operations given the current year's insurance expense is estimated by management in conjunction with the Company's
outside actuary to take into consideration past history and current costs and regulatory trends. Once the Company develops its best estimate of insurance expense premiums for the year, the Company fully allocates such
costs out to the business leaders to hold them accountable for the current year costs within operations. However, since these prior period reserve changes relate to claims that could date back many years, current
management has limited ability to influence the ultimate development of the prior year changes. Accordingly, including the prior period reserve changes in the Company's current operational results would not depict how the
business is run as the Company holds its management accountable for the current year’s operational performance. The Company believes the exclusion of the self-insurance adjustment from income from continuing
operations is useful to investors by enabling them to better assess our operating performance in the context of current year profitability. For the three months ended January 31, 2020 and 2019, our self-insurance general
liability,workers’ compensation, and automobile and medical and dental insurance claims related to prior period accident years was decreased by $6.6 million and increased by $5.0 million, respectively.
(c) Primarily represents one-time implementation costs related to the Company's transformational IT infrastructure projects and requirements associated with General Data Protection Regulation standards.
(d) Represents restructuring costs related to the continued integration of GCA acquisition in September 2017.
(e) The Company's tax impact is calculated using the federal and state statutory rate of 28.1% for QTD FY20 and FY19. We calculate tax from the underlying whole-dollar amounts, as a result, certain amounts may not
recalculate based on reported numbers due to rounding.
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Unaudited Reconciliation of Non-GAAP Financial Measures
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Unaudited Reconciliation of Non-GAAP Financial Measures
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2020 Guidance
(a) With the exception of the 2020 Work Opportunity Tax Credits and ASU 2016-09, this guidance does not include any potential benefits associated with certain
other discrete tax items and other unrecognized tax benefits. This guidance does not assume any potential accretion related to the Company's share
repurchase program. Additionally, the Company does not anticipate any material impact to income from continuing operations from the adoption of ASU
2016-02 (“Topic 842”) at this time.
(b) Adjustments include costs associated with the strategic review, legal settlements, adjustments to self-insurance reserves pertaining to prior year's claims and
other unique items impacting comparability.
